October 5, 2022
insurance

What are the objectives of insurance?

The objectives of insurance are to cover the cost of damages to your property and things you value if it’s lost, stolen, or destroyed. Technically speaking, insurance is a kind of risk management tool. The idea behind insurance is that by paying a small amount on a regular basis, you are able to protect yourself in the event that something goes wrong and you suffer very large losses.

Insurance can be thought of as an investment in peace of mind. You purchase protection against unforeseen events such as accidents, natural disasters, or fires by making periodic payments into an insurance fund that provides the replacement in case something untoward happens.

The objectives of insurance

to provide the best possible financial protection in the event of loss or damage to an asset;

And to reduce the financial burden on others in an emergency situation;

to establish a predictable and level return for money; and,

to provide a fair return for the risk.

What are the advantages of insurance?

a less stressful life by relieving a person from the fear of financial loss.

the certainty of protection in the event of a catastrophe or loss.

the opportunity to gain a level of savings or investment without incurring the high costs associated with investing directly;

reduced costs for those who have to insure against liability.

a long-term financial advantage, including tax advantages.

Objectives of insurance

What are the objectives of life insurance?

to insure the life of a designated person;

to provide for the financial needs of dependents and loved ones.

Why do people buy life insurance?

many people buy life insurance to leave more money for their family after they die – to ensure that their children don’t have to endure poverty and deal with the emotional stress of loss in their old age;

for peace of mind – so you don’t have to worry about financial hardships when you are alive.

How can life insurance be use most effectively?

for use as a long-term savings or investment tool, or as part of a portfolio strategy, and not just as an investment tool in its own right.

Advantages of Insurance

They provide financial protection from the risk of loss or damage to an asset.

It reduces financial hardship on others in the event of an emergency.

It provides a steady return on your investment.

The insurance company is willing to assume the risk for you and assume that you will indeed experience a financial loss.

What are policy and coverage?

It is good to distinguish between policies and coverages.

Policies are underwritten by carriers. A policy is an agreement between a person or organization (the policyholder) and an insurance company (the policyholder’s insurer). The insurance company agrees with the person or organization to accept as many risks as specified in the policy. It agrees that it will pay claims made by the insured on certain types of covered events in exchange for a premium, usually paid monthly.

A coverage, however, is what is write into a policy in exchange for a premium. It applies only to the specific events included in its exclusion section.

Coverage is the legal list of agreeing upon services and/or events for which a claim can be made. And also the agree upon limitations of payments for each event.

How does Car Insurance work?

Assume it’s July 1, 20XX and you just bought a new car. July 15 is your first premium payment due date. You have now made your first premium payment. On August 1, 20XX, your car was stolen! In this event of a covered loss, you go to the insurance company to make a claim. The insurance company will then review all available information pertaining to your circumstances before granting or denying your claim.

Therefore, in this example, you would file a claim with your insurance company. The insurance company would then send out a tow truck to remove the vehicle. Therefore, they would charge you a fee for that service, which is the deductible. The amount of money you owe them will be the excess and that is based on your policy and how much it costs to remove the vehicle from your premises if they don’t agree with your claim.

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